The beautiful thing about independent, objective research is instead of having a horse in the race data is studied before opinions are offered. In contrast, many ‘experts’ provide opinions that are based on a belief systems that are already held to be true or worse, the primary objective is to sell something. The truth is, we as consumers are often not much better. Before accepting a rumor or a story we used to make a trek to the library, ask the librarian for help in locating a good book sources, which might include Encyclopedia Britannica, and sit down to do our homework. Ahh, remember the good old days. When it comes to gathering information today we are very inclined to ask our phones or wait for the Twitter feeds.
Here we help you separate the noise or fake news from the news. Perhaps you heard about the Census Bureau report just released last week as reported in The New York Times, September 12, 2017 showing that in 2016 the U.S. median household income increased by 3.2%, hitting an inflation adjusted, all-time high of $59,039. That’s when I got suspicious. So I went to Rodney Johnson, Senior Editor, Dent Research to ask him if the data is credible. Before I reached Rodney I talked to a local professional who told me the report shows how well this administration is doing. I went to great lengths to show the data is for last year, so how could one in their right mind give credit to this President who took office in 2017. Johnson reminded me that the last household income (whether one or two people working) was $58,665, set at the end of the 20th century as reported in The New York Post, September 12, 2017. Every news source I came across declared that the country has finally recovered from the Great Recession.
With your tax dollars at work, the bastion of statistics, the U.S. Census Bureau which compiles all of the data in question, published the record-setting number with a caveat: don’t compare it to prior years, Johnson pointed out. Really.
You will recall that as he survived testicular cancer, cyclist Lance Armstrong was stripped of his seven Tour de France titles in 2012, due to doping charges. Like Armstrong, the Census Bureau’s new numbers have been juiced, explained Johnson. “The statisticians at the Census Bureau just cooked the books. But at least they told us about it,” said Johnson on August 19, 2017.
John explained that “in 2011 the Urban Institute estimated that the Census Bureau pencil-pushers missed 90% of income from retirement accounts in their calculations.” That’s right, the Census Bureau paid consultants to identify missing money. Brendan Kirby, atPoliZette put it this way on September 12, 2017, “ It appears a two-pronged approach was in order. First, ask Americans what they have in assets, and two, estimate that income if they don’t provide answers. The strong back-to-back growth in median income drew skepticism from some experts. Peter Morici, an economic policy expert at the University of Maryland, said the income gains do not jibe with persistently slow increases in the Gross Domestic Product.”
“In 2014, median income was flat compared to the prior year. And the figure remained well below the 1999 record numbers,” stated Johnson. He went on to say then the Census Bureau asked different questions and provided their own answers. “Suddenly income popped, up 5.2% in 2015, the largest growth on record. Amazing! And the gift of massaged numbers kept on giving in 2016, which added to the gains and got us to the new highs. But if we look through the headlines, the reality of today looks a lot like yesterday. Median income is certainly higher, but the gains aren’t evenly spread. Some people still capture more of the gains, and they are exactly whom you’d expect.”
Remember it is 2017 that Boomers, born 1946-1964, turn 71. For the rest of your life after 70.5 the IRS requires you to take income, which increases every year, from your traditional retirement accounts. Johnson put it this way, “If you have a retirement account but don’t remember how much you withdrew, er, received in income, don’t worry. They’ll help you guesstimate. The same goes for interest on things like checking accounts. Unfortunately, I don’t think the IRS accepts Census Bureau estimates as tax payments. They still want you to show up with cold, hard cash – the type that isn’t juiced. “
Despite this ‘new normal’, I believe it is fair to say that Mother Nature and Father Time hold the genuine ‘trump’ cards. So before you drink the Kool-Aid that today’s market all-time high will be replaced by a higher high tomorrow, let me ask you to consider how you would feel if the Dow dropped to hypothetically, 6,000 first? Why do I ask? Howard Gold atMarketWatch on September 20, 2017, “One thing has been missing from this 8 ½-year bull market, now the second-longest in history: the active, enthusiastic participation of individual investors. For years, average Americans have sat on the sidelines. Many had been burned badly by the dot.com crash and the housing bust during the 2000s. Many simply didn’t have the money to invest the way finger-wagging pundits like me said they should. This perennial skepticism, shared by institutional and sophisticated individual investors, made this the most unloved bull market we’ve ever seen — and kept millions fighting the tape when there was big money to be made.
Well, now that’s all changed. Whether it was the Dow Jones Industrial Average (DJIA) plowing higher above 20,000, the unemployment rate falling into the low-4% area, or the election of Donald J. Trump as president of the United States, average Americans have thrown their reservations to the winds and gone whole-hog into stocks again.
The latest Wells Fargo/Gallup Investor and Retirement Optimism Index hit 138 in September, its highest level in 17 years.”
Gold maintains that “The American Association of Individual Investors’ (AAII) closely followed sentiment index also turned sharply bullish last week, when 41.3% reported being bullish about stocks, up from the mid-20% area. The percentage of bears dropped sharply. AAII members generally tend to be more active, sophisticated individual investors than the respondents to Gallup’s poll.”
A well respected market technician Ron Meisels said in Gold’s column in May of this year with “Republican investor’s confidence 209 points higher today than in the third quarter of 2016, while Democratic investor’s confidence is 119 points lower, that’s a sign the bull market is in its last innings.”
Who told you well in advance that there would be two category 4 hurricanes to strike the US in 17 days? So take the next two weeks to prepare for the good, the bad, and the unforeseen in the markets. Otherwise, once disaster strikes, there is no time to prepare.
The proof is in the planning.
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